A Bank Has $500 Million in Checking Deposits with Interest

question 73

Multiple Choice

A bank has $500 million in checking deposits with interest and non-interest costs of 6%,$250 million in savings and time deposits with interest and non-interest costs of 14%,and $250 million in equity capital with a cost of 25%.The bank has estimated that reserve requirements,deposit insurance fees and uncollected balances reduce the amount of money available on checking deposits by 15% and on savings and time deposits by 4%.What is the bank's before-tax cost of funds?

• A)15.00%
• B)12.75%
• C)13.29%
• D)15.74%
• E)None of the options is correct

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Definitions:

Confidence Interval

An interval of values, calculated from samples, that probably includes an undetermined population statistic, at a designated level of certainty.

Ordinal Data

A type of categorical statistical data type that involves order or ranking of the values but not the exact difference between them.

Weight

A measure of the gravitational force exerted on an object, typically measured in pounds or kilograms.

Gender

A social construct used to classify a person as a man, woman, or other identity, based on societal roles, behaviors, and characteristics.